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Bowman Specialists Incorporated ( BSI ) manufactures specialized equipment for polishing optical lenses. There are two models - one ( A - 2 5 )
Bowman Specialists Incorporated BSI manufactures specialized equipment for polishing optical lenses. There are two modelsone
A principally used for fine eyewear and the other A for lenses used in binoculars, cameras, and similar equipment.
The following table shows how the manufacturing cost of each unit is calculated, using activitybased costing, for these manufacturing
cost pools.
BSI currently sells the A model for $ and the A model for $ Manufacturing costs and activity usage for the two
products follow:
Required:
Calculate the product cost and product margin for each product.
A new competitor has entered the market for lenspolishing equipment with a superior product at significantly lower prices, $
for the A model and $ for the model. To try to compete, BSI has made some radical improvements in the design and
manufacturing of its two products. The materials costs and activity usage rates have been decreased significantly, as follows:
a Calculate the total product costs with the new activity usage data.
b Can BSI make a positive gross margin with the new costs, assuming that it must meet the price set by the new competitor?
What cost management method might be useful to BSI at this time?
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